CVM Resolution 189: Approval of Technical Orientation OCPC 07(R1) on Disclosure in General Purpose Financial Reporting

THE PRESIDENT OF THE SECURITIES AND EXCHANGE COMMISSION OF BRAZIL - CVM makes it known that the Board, in a meeting held on October 4, 2023, based on §§ 3 and 5 of art. 177 of Law No. 6.404, of December 15, 1976, combined with items II and IV of § 1 of art. 22 of Law No. 6.385, of December 7, 1976, APPROVED the following Resolution:

Art. 1. It is made mandatory for open capital companies the Technical Orientation OCPC 07(R1), which deals with Disclosure in the Reporting of Financial Reports for General Purposes, issued by the Accounting Pronouncements Committee – CPC, according to annex “A” to this Resolution.

Art. 2. CVM Resolution No. 152, of June 15, 2022, is revoked, on the date this Resolution enters into force.

Art. 3. This Resolution enters into force on November 1, 2023.

Signed electronically by
JOÃO PEDRO BARROSO DO NASCIMENTO
President

Table of Contents Item
OBJECTIVE 1 – 2
SCOPE 3 – 5
DISCLOSURE ALREADY REGULATED 6 – 30
Main general guidelines contained in the Conceptual Framework for Financial Reporting 6 – 19 Main general guidelines contained in Technical Pronouncement CPC 26 20 – 28 Main general guidelines contained in the Corporation Law 29 – 30 ADDITIONAL GUIDELINES 31 – 39 IAS 1 – Presentation of Financial Statements and IFRS Practice Statement 2: Making Materiality Judgements 40 – 46 TRANSITIONAL PROVISIONS 47 REASONS FOR THE ISSUANCE OF THIS ORIENTATION ON THE PREPARATION OF NOTES TO THE FINANCIAL STATEMENTS IN1 – IN10

OBJECTIVE

The objective of this Orientation is to address the basic requirements for preparation and disclosure to be
observed when disclosing general purpose financial reports.
This Orientation is specifically dealing with the disclosure of information specific to the annual and interim
financial statements, especially those contained in the notes to the financial statements.

SCOPE
3. This Orientation essentially deals with disclosure issues, not covering recognition and measurement issues.
4. It consolidates existing requirements in Pronouncements, Interpretations and other Orientations of this
Committee, in the provisions of the IASB not disclosed by this Committee, as well as in the Law, without altering such requirements.

DISCLOSURE ALREADY REGULATED
Main general guidelines contained in the Conceptual Framework for Financial Reporting
6. The objective of the general purpose financial report, as established in item 1.2 of
Technical Pronouncement CPC 00 - Conceptual Framework for Financial Reporting, “is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors, in making decisions regarding the provision of resources to the entity.” (s.a.)
7. Useful financial information is that endowed with the fundamental qualitative characteristics of the
general purpose financial report. These characteristics, according to the same Pronouncement, item 2.5, are “relevance and faithful representation”. (s.a.)
8. Item 2.6 of this Conceptual Framework defines: “Relevant financial information is capable of
making a difference in decisions made by users.” (s.a.)
9. And item 2.11 reinforces: “Information is material if its omission, misstatement or obscurity could
reasonably influence the decisions that the primary users of general purpose financial reports make based on these reports, which provide financial information about a specific reporting entity”. (s.a.)
10. It is inferred from these provisions that all information specific to accounting statements of which the
reporting entity has knowledge that can indeed influence investors and creditors, and only these, must be disclosed. The disclosure of irrelevant information often causes the bad effect of diverting the user's attention, which directly contradicts the objective of the general purpose financial report.
11. Item 2.13 states, addressing the financial statement (which includes the notes to the financial statements): “To be
a perfectly faithful representation, the representation has three characteristics. It is complete, neutral and free from error. Obviously, perfection is never or rarely achieved. The objective is to maximize these qualities as much as possible.” (s.a.)
12. This item highlights the preparer's responsibility regarding the completeness of information, the

SECURITIES AND EXCHANGE COMMISSION OF BRAZIL
Rua Sete de Setembro, 111/2-5th and 23-34th Floors, Center, Rio de Janeiro/RJ – ZIP: 20050-901 – Brazil - Tel.: (21) 3554-8686 Rua Cincinato Braga, 340/2nd, 3rd and 4th Floors, Bela Vista, São Paulo/SP – ZIP: 01333-010 – Brazil - Tel.: (11) 2146-2000 obligation that the information and comments related to it be neutral, which includes the qualification and adjectivization and the care for the absence of errors.
13. Item 2.4 cites: “If financial information is to be useful, it must be relevant and faithfully represent
what it purports to represent. The usefulness of financial information is increased if it is comparable, verifiable, timely and understandable.” (s.a.)
14. Attention is drawn, in this item 2.4, to the characteristic of understandability, which includes the nomenclature
of accounts in the statements and the wording used in the notes to the financial statements. The minimum knowledge required of the user of financial statements does not necessarily cover the same depth as experts, nor the same overly specific terminologies of the entity or the economic segment to which the entity belongs. Thus, only when absolutely unavoidable should specific technical language of the entity or sector be used. It is advisable to consider, in this case, the presentation of a complete and concise glossary along with the statements.
15. Materiality, according to the Conceptual Framework, in general terms, is based on the nature or the
magnitude of the information, or both. Consequently, one cannot a priori specify a uniform quantitative limit for materiality or predetermine what would be judged material for a particular situation. For this reason, the judgment on the relevance of the information will be, practically, case by case. And materiality is the specific treatment of relevance for a particular entity. Item 2.11 states: “... materiality is an aspect of relevance specific to the entity based on the nature or magnitude, or both, of the items to which the information refers in the context of the entity's individual financial report”. (s.a.)
16. Thus, normally numbers significant for the size of the entity are relevant due to their
potential influence on users' decisions, but certain values, even if small in absolute or percentage terms, can be material for a particular entity due to not their size, but their nature. This means that they may be of interest to users' decisions due to the importance of the information in terms of governance, possible future impact, social information, etc.
17. In summary, the Conceptual Framework determines that all information is material and must be disclosed
if its omission or distorted disclosure could influence decisions that users make as based on the general purpose financial report of the specific entity reporting the information.
Consequently, if it does not have this characteristic, the information is not material and, therefore, is not relevant, and should not be disclosed. Furthermore, when information is relevant, it must also consider (i) the characteristics of faithful representation, being complete, neutral and free from error; and (ii) the qualitative characteristics of information enhancement as being, comparable, verifiable, timely and understandable.
18. This set cited in the previous items highlights that the focus to be considered in the preparation and in the
analysis of the financial statements is that of the relevance of the information necessary for the decision-making process of investors and creditors.

Main general guidelines contained in Technical Pronouncement CPC 26
20. Technical Pronouncement CPC 26 – Presentation of Financial Statements determines, in
its items 29 to 31, that:
“29. The entity must present separately in the financial statements each class of material items of a similar nature. The entity must present separately items of distinct nature or function, unless they are immaterial.” (s.a.)
“30. ... If an item is not individually material, it must be aggregated with other items, either in the financial statements, or in the notes to the financial statements.” But observed that “an item may not be sufficiently material to justify its individual presentation in the financial statements, but may be sufficiently material to be presented in individual form in the notes to the financial statements.” “30A. ... The entity must not reduce the understandability of its financial statements, concealing material information with irrelevant information or by aggregating material items that have different nature or functions. “31. ... The entity does not need to provide specific disclosure, required by a Technical Pronouncement, Interpretation or Orientation of the CPC, if the information resulting from the disclosure is not material.” (s.a.)
21. These three items, briefly, lead to the conclusion that disclosure, both in the statements
and in the notes to the financial statements, must be of information related to items grouped by similarity (not equality) in their nature and in their function. However, if irrelevant, they can be inserted in other groups for presentation purposes.
22. And another fundamental conclusion: any specific information required by any
Pronouncement, Interpretation or Orientation that is not material should not be disclosed, including to not divert the user's attention, with the exception of that expressly required by a regulatory body.
22A It is fundamental that the understandability of information is not reduced by disclosing irrelevant information that hinders the reading and comprehension of relevant information, nor by aggregating material items with different natures or functions.
23. Regarding the form of presentation, item 113 of the same Pronouncement determines that “The notes
to the financial statements must be presented, as far as practicable, in a systematic manner. In determining systematic form, the entity must consider the effects on understandability

SECURITIES AND EXCHANGE COMMISSION OF BRAZIL
Rua Sete de Setembro, 111/2-5th and 23-34th Floors, Center, Rio de Janeiro/RJ – ZIP: 20050-901 – Brazil - Tel.: (21) 3554-8686 Rua Cincinato Braga, 340/2nd, 3rd and 4th Floors, Bela Vista, São Paulo/SP – ZIP: 01333-010 – Brazil - Tel.: (11) 2146-2000 and comparability of its financial statements. Each item of the financial statements must have a cross-reference with the respective information presented in the notes to the financial statements.”
24. Item 114, by citing various orders of presentation of the notes to the financial statements, (the entity chooses the one that best applies to its situation), highlights accepting any of them:
(a) give prominence to the areas of activities that the entity considers most relevant for the understanding of its financial performance and financial position, such as grouping information about certain operational activities; (b) group information about accounts measured in a similar manner, such as assets measured at fair value; or (c) follow the order of the accounts of the income statement and other comprehensive income and the balance sheet,...” It is seen, therefore, that alternative (c) above, the most used in practice (in Brazil normally starting with balance sheet accounts, and not those of the income statement), is not the only alternative for ordering the notes to the financial statements.
25. In some circumstances it may be necessary or desirable to change the order of certain items
in the notes to the financial statements. For example, information about changes in fair value recognized in profit or loss may be disclosed together with information about maturities of financial instruments, although the first relates to the income statement and the latter relates to the balance sheet. However, the most systematic structure possible must always be used in the notes to the financial statements.
26. Item 117 of the same Pronouncement determines that “The entity must disclose material information
on accounting policy (see item 7). Accounting policy information is material if, when considered together with other information included in the entity's financial statements it can reasonably be expected to influence the decisions that the primary users of general purpose financial statements make based on these financial statements.” Items 117A to 117E detail too many aspects of materiality in the disclosure of accounting policies (see items 40 to 46 of this Orientation which also deal with this). 26A Item 117A clearly defines: “Accounting policy information related to immaterial transactions, other events or conditions does not need to be disclosed. Accounting policy information may, however, be material due to the nature of the transactions related, other events or conditions, even if the values are immaterial. However, not all accounting policy information related to material transactions, other events or conditions is itself material.” That is, the disclosure of accounting policy applies the same as to values in the statements and in the notes regarding materiality, which includes the nature of the transactions or other aspects. And it makes it clear that sometimes the values are material, but the policy on how to treat them may not be.

Main general guidelines contained in the Corporation Law
29. Law No. 6.404/76 expressly requires notes that clarify the financial situation and the
results, and mentions the obligation to present accounting policies that are specific and that apply to significant business and events. Its art. 176 determines:
“§ 5th The notes to the financial statements must:
I – present information about the basis of preparation of the financial statements and the specific accounting practices selected and applied to significant business and events;
....
IV – indicate:
a) the main criteria for the valuation of asset elements...” (s.a.)
30. That is, the Corporation Law follows the same line of requiring notes on bases of preparation and on
accounting policies that are specific to the reporting entity and that are related to items

Summary of the main general guidelines contained in the cited texts The CPC emphasizes, therefore, that these cited documents specify that:
A. All disclosed information must be relevant to external users. And they are only relevant if they influence the decision-making process of investors and creditors. And non-relevant information should not be disclosed.
B. Relevance in general and materiality in the specific case of the entity, in turn, encompass the concepts of magnitude and nature of the information, viewed from the users' perspective.
C. Only relevant and material information and specific to the entity should be disclosed, both
those related to accounting policies and all other notes, including those related to possible effects of accounting policies to be adopted in the future.
D. The mention, in Pronouncements, Interpretations and Orientations of the CPC and in Law, of disclosure requirements must always be interpreted in light of the relevance and materiality of the information to be disclosed, even if the expressions “minimum disclosure”, “at least” and similar appear. Thus, even if one of these documents “requires” a certain note to the financial statements, this is always mandatory only if the information is material and, consequently, relevant for the decision-making of users. E. On the other hand, no relevant and material information that could influence the user of the entity's financial statements can fail to be disclosed, even if there is no explicit mention of it in Law or in a CPC document. F. The spirit of simple checklist compliance does not absolutely meet the necessary for the achievement of the objectives of the general purpose financial report.

ADDITIONAL GUIDELINES
31. Although not specifically mentioned in these cited documents, in the set of
Pronouncements, Interpretations and Orientations of this CPC the need for emphasis on information related to all topics that may represent risks to the entity is always present. For example, in Technical Pronouncement CPC 26, this can be seen explicitly in items 114, 125, 126 and 128. Consequently, this CPC understands that within the concept of relevance this characteristic must always be considered.
32. In the notes to the financial statements regarding the bases of preparation of the financial statements and the
specific accounting policies of the entity, the texts of normative acts should not be repeated, but only the main relevant and applicable aspects to the entity summarized.

COMMISSION OF SECURITIES AND EXCHANGE
Rua Sete de Setembro, 111/2-5th and 23-34th Floors, Center, Rio de Janeiro/RJ – ZIP: 20050-901 – Brazil - Tel.: (21) 3554-8686 Rua Cincinato Braga, 340/2nd, 3rd and 4th Floors, Bela Vista, São Paulo/ SP – ZIP: 01333-010 – Brazil - Tel.: (11) 2146-2000

Only references to the numbers and names of the documents of this CPC and a summary of the main aspects relevant and specifically applicable to the entity may be made, but there should be no transcription of excerpts from these documents.
When there is a choice between two or more accounting policies permitted to the entity and when there is a change in accounting policy, a note must clarify in detail such facts, considering the specific determinations established by CPC 23, especially the reasons for the choice or change and the consequences for the financial statements.
Notes on accounting policies may be included together with notes relating to the items contained in the financial statements to which they refer.
The order of presentation of the explanatory notes, after those relating to the operational context, the basis of preparation of the financial statements (if used), and the statement of compliance, may follow the order of relevance of the subjects treated, always observing the requirement of cross-reference between the notes and the items of the financial statements or to other notes to which they refer.
In the drafting of the notes, there should be, as far as possible, no repetition of facts, policies, and other information, in order to avoid diverting the attention of the user.
The entity's management must, in the statement of compliance note, affirm that all relevant information specific to the financial statements, and only that information, is being evidenced, and that it corresponds to the information used by it in its management.
In the assessment of relevance and materiality, the information from the individual statements and the information from the consolidated statements must be considered separately, as it is possible that a certain information is relevant/material for one case and not for the other.

CPC 26 – Presentation of Financial Statements and IFRS Practice Statement 2: Making Materiality Judgements

Items 117 to 117E of CPC 26 – Presentation of Financial Statements – specify, as already treated, that accounting policy information related to immaterial transactions, other events, or conditions does not need to be disclosed and also include examples of circumstances that the entity may consider in its assessment of whether accounting policy information is material to its financial statements.
The IFRS Practice Statement 2: Making Materiality Judgements (PS2) (denominated IFRS Practice Statement 2 by IBRACON 1) presents a diagram, number 2, which illustrates how an entity assesses whether accounting policy information is material and, therefore, should be disclosed, referencing those items. The following examples were included to better understand the concept of materiality in the application of accounting policies, in no way affecting any current standards, including on disclosure.

1 Reference to the publication made by Ibracon of the set of International Accounting Standards issued by the IASB translated into Portuguese and authorized by the IFRS Foundation.

Diagram 2 from Practice Statement - Determining if accounting policy information is material

EXAMPLES OF APPLICATION

Example A from PS2: Materiality Judgements on the Application of Accounting Policies
An entity has a policy to capitalize expenditures on items of property, plant, and equipment above a specified limit and recognize any lower amounts as expense. CPC 27 – Property, Plant and Equipment - requires that the cost of an item of property, plant, and equipment be recognized as an asset when the criteria of item 7 are met.

The entity assessed that its accounting policy – not capitalizing expenditures below a specific limit – will not have a material effect on the current period's financial statements or on future financial statements, because it could not reasonably be expected that information reflecting the capitalization and amortization of these expenditures would influence the decisions made by the primary users of the entity's financial statements.

Provided that such policy does not have a material effect on the financial statements and has not been established to intentionally achieve a particular presentation of the entity's financial position, financial performance, or cash flows, the entity's financial statements comply with CPC 27. Nevertheless, such policy is reassessed in each reporting period to ensure that its effect on the entity's financial statements remains immaterial.

Example B from PS2: Materiality Judgements on Disclosures Specified by IFRS Standards
An entity presents property, plant, and equipment as a separate line item in its statement of financial position. CPC 27 – Property, Plant and Equipment establishes specific disclosure requirements, including the disclosure of the amount of contractual commitments for the acquisition of property, plant, and equipment (item 74(c)).

In preparing its financial statements, the entity assesses whether the disclosures specified in CPC 27 are material information. Even if property, plant, and equipment is presented as a separate line item in the statement of financial position, not all disclosures specified in CPC 27 will be automatically required. In the absence of any qualitative considerations (see items 46–51), if the amount of contractual commitments for the acquisition of property, plant, and equipment is not material, the entity is not obliged to disclose this information.

Example I from PS2: Information on a Related Party Transaction Assessed as Material
An entity identified measures of its profitability as the measures of great interest to the primary users of its financial statements. In the current reporting period, the entity signed a five-year contract with Company ABC. Company ABC will provide the entity with maintenance services for the entity's offices for an annual fee. Company ABC is controlled by a member of the entity's key management personnel. Therefore, Company ABC is a related party of the entity.

CPC 05 – Disclosure of Related Party Information - requires an entity to disclose, for each related party transaction that occurred during the period, the nature of the relationship with the related party, as well as information about the transaction and outstanding balances, including commitments, necessary for users to understand the potential effect of the relationship on the financial statements.

In preparing its financial statements, the entity assessed whether the information about the transaction with Company ABC was material.

The entity began its assessment from a quantitative perspective and evaluated the impact of the related party transaction compared to the entity's profitability measures. Having initially concluded that the impact of the related party transaction was not material from a purely quantitative perspective, the entity additionally evaluated the presence of any qualitative factors.

As noted in CPC 05, related parties may enter into transactions that non-related parties would not enter into, and transactions may be priced at values that differ from the price for transactions between non-related parties.

The entity identified the fact that the maintenance contract was concluded with a related party as a characteristic that makes the information about this transaction more likely to influence the decisions of its primary users.

The entity additionally evaluated the transaction from a quantitative perspective to determine if it is reasonable to expect that the impact of the transaction could influence the decisions of the primary users when considered with the fact that the transaction was with a related party (i.e., the presence of a qualitative factor reduces the quantitative threshold). Having considered that the transaction was with a related party, the entity concluded that it is reasonable to expect that the impact would be large enough to influence the decisions of the primary users. Thus, the entity assessed the information about the transaction with Company ABC as material and disclosed this information in its financial statements.

Example J from PS2: Information on a Related Party Transaction Assessed as Immaterial
An entity identified measures of its profitability as the measures of great interest to the primary users of its financial statements. The entity has a large fleet of vehicles. In the current reporting period, the entity sold a nearly fully depreciated vehicle to Company DEF. The entity transferred the vehicle for a total consideration consistent with its market value and its book value. Company DEF is controlled by a member of the entity's key management personnel. Therefore, Company DEF is a related party of the entity.

In preparing its financial statements, the entity assessed whether the information about the transaction with Company DEF was material.

As in the previous Example I, the entity began its assessment from a quantitative perspective and evaluated the impact of the related party transaction compared to the entity's profitability measures. Having initially concluded that the impact of the related party transaction was not material from a purely quantitative perspective, the entity additionally evaluated the presence of any qualitative factors.

The entity transferred the vehicle for a total consideration consistent with its market value and its book value. However, the entity identified the fact that the vehicle was sold to a related party as a characteristic that makes the information about this transaction more likely to influence the decisions of its primary users.

The entity additionally evaluated the transaction from a quantitative perspective but concluded that it was reasonable to expect that its impact would be very small to influence the decisions of the primary users, even when considered with the fact that the transaction was with a related party. The information about the transaction with Company DEF was consequently assessed as immaterial and not disclosed in the entity's financial statements.

Example T from PS2: Making Materiality Judgements on Accounting Policy Information that Only Duplicates the Requirements of Accounting Pronouncements
In this example, it is considered that property, plant, and equipment is material to the financial statements of an entity.
The entity has no intangible assets or goodwill and has not recognized an impairment loss on its property, plant, and equipment in the current or comparative reporting periods.
In previous reporting periods, the entity disclosed accounting policy information related to the impairment of non-current assets that repeated the requirements set forth in CPC 01 – Impairment of Assets - and did not provide entity-specific information. The entity disclosed that:

The carrying amounts of the group's intangible assets and its property, plant, and equipment are reviewed at each reporting date to determine if there is any indication of impairment. If such an indication exists, the recoverable amount of the asset is estimated. For goodwill and intangibles with indefinite useful lives, the recoverable amount is estimated at least annually;
An impairment loss is recognized in the statement of profit or loss whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount;
The recoverable amount of assets is the higher of fair value less costs to sell and its value in use. In measuring value in use, estimated future cash flows are discounted to present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the specific risks of the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs;
Impairment losses recognized in relation to cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to that cash-generating unit and then to reduce the carrying amount of the other assets in the unit proportionally;
An impairment loss in relation to goodwill is not subsequently reversed. For other assets, an impairment loss is reversed if there is a change in the estimates used to determine the recoverable amount, but only to the extent that the new carrying amount does not exceed the carrying amount that would have been determined, net of depreciation and amortization, had no impairment loss been recognized.
Having identified the assets subject to impairment testing as being material to the financial statements, the entity assesses whether the accounting policy information for impairment is, in fact, material.
As part of its assessment, the entity considers that an impairment or a reversal of an impairment did not occur in the current or comparative reporting periods. Consequently, it is unlikely that the accounting policy information on how the entity recognizes and allocates impairment losses is material to its primary users. Similarly, as the entity has no intangible assets or goodwill, it is unlikely that information about its accounting policy for impairment of intangible assets and goodwill provides material information to its primary users. However, the entity's impairment accounting policy refers to a theme for which the entity is required to make significant judgments or assumptions, as described in items 122 and 125 of CPC 26 – Presentation of Financial Statements. Given the specific circumstances of the entity, it concludes that it could reasonably be expected that information about its significant judgments and assumptions related to its impairment assessments would influence the decisions of the primary users of the entity's financial statements. The entity notes that its disclosures on significant judgments and assumptions already include information about the significant judgments and assumptions used in its impairment assessments. The entity decides that it is unlikely that the primary users of its financial statements need to understand the recognition and measurement requirements of CPC 01 – Impairment of Assets - to understand the respective information in the financial statements. Consequently, the entity concludes that the disclosure of a summary of the requirements of CPC 01 in a separate accounting policy for impairment would not provide information that could reasonably influence the decisions made by the primary users of its financial statements. Instead, the entity discloses material accounting policy information related to the significant judgments and assumptions that the entity applied in its impairment assessments in other parts of the financial statements. Although the entity assesses some accounting policy information for asset impairment as immaterial, the entity still assesses whether other disclosure requirements of CPC 01 provide material information that must be disclosed.

FINAL PROVISIONS

Matli uements
47. This pronouncement replaces OCPC 07 – Disclosure in General Purpose Financial Reporting approved by the Accounting Pronouncements Committee on September 26, 2014.

REASONS FOR THE ORIGINAL ISSUANCE AND THIS UPDATE OF THE GUIDANCE ON THE PREPARATION OF EXPLANATORY NOTES (this section accompanies but is not part of the Guidance)

IN1. The volume of information contained in the general purpose financial report has caused significant questioning by market agents regarding the extent of the material presented. Many agents have noted the existence of irrelevant information, while at the same time commenting on the lack of relevant information.

IN2. The reproduction of information often considered unnecessary would bring as a consequence an increase in the cost of preparation and disclosure, which is also the focus of complaints from various market agents, from the preparers of financial reports to analysts, including the companies' advisors.

IN3. The presentation of financial statements, according to many, seems to adopt the checklist technique in the disclosures required by the Pronouncements, Interpretations, and Guidance of the Accounting Pronouncements Committee - CPC, that is, simply checking if each item is on a previous list of required disclosures, without observing, often, the criteria of relevance. It has even been asserted that the excess of information hinders the adequate decision-making by the users of the financial statements.

IN4. To the best of our knowledge, this is not a typically Brazilian situation. There has been a strong worldwide movement towards finding ways to bring to the financial statements only the information that really interests users in the sense of guiding their decisions about an entity. So much so that discussions and documents have emerged regarding this, such as:

The EFRAG – European Financial Reporting Advisory Group, which recommends to the European Union the adoption or non-adoption of documents issued by the IASB (IFRSs), issued in 2012 the document: Towards a Disclosure Framework for the Notes, discussing and collecting opinions specifically on the disclosure of explanatory notes. As a conclusion, it proposed the elaboration of a specific Conceptual Framework for the presentation of these notes.
The ASAF – Accounting Standards Advisory Forum, of the IASB – International Accounting Standards Board itself, in its September 2013 meeting, intensely discussed the problem and deliberated to propose to the IASB board actions in the direction of disciplining the general guidelines on disclosure and explanatory notes.
The IASB released the document Discussion Forum – Financial Reporting Disclosure, in May 2013, reporting various manifestations from users, preparers, and auditors regarding difficulties related to the quality of explanatory notes and created a group to discuss

the problem. The IASB also published the Practice Statement 2: Making Materiality Judgements, which provides guidance on how to apply the concept of materiality in the context of financial reporting, including the disclosure of accounting policies.

IN5. The Brazilian context has been characterized by a tendency to over-disclose, often copying the text of the standards without adding entity-specific information. This practice has been criticized by users who find it difficult to identify the information that is truly relevant to their decision-making process.

IN6. The update of this guidance aims to align with international best practices and to provide clearer instructions on how to apply the concept of materiality in the disclosure of accounting policies. It is expected that this will result in more useful and concise financial statements.

IN7. The guidance emphasizes that the disclosure of accounting policies should focus on the policies that are significant to the entity's financial statements. It is not necessary to disclose policies that are not significant or that do not involve significant judgments or assumptions.

IN8. The guidance also provides examples of how to apply the concept of materiality in different scenarios, such as the disclosure of related party transactions and the impairment of assets. These examples are intended to help entities understand how to assess materiality and make appropriate disclosures.

IN9. The guidance is intended to be used in conjunction with the relevant accounting standards and interpretations. It does not override any specific requirements of the standards but provides additional guidance on how to apply the concept of materiality in the context of financial reporting.

IN10. The Accounting Pronouncements Committee (CPC) believes that the implementation of this guidance will contribute to the improvement of the quality of financial reporting in Brazil and will enhance the usefulness of financial statements for users.

IN11. The CPC invites comments and suggestions from the market on this guidance. Comments should be sent to the CPC Secretariat within 60 days of the publication of this guidance.

IN12. The CPC will consider the comments received and may update this guidance accordingly. The CPC will also monitor the implementation of this guidance and may provide additional guidance or interpretations as necessary.

IN13. The CPC thanks the market for its participation and contributions to the development of this guidance.

IN14. The CPC is committed to the continuous improvement of the accounting standards in Brazil and to the alignment with international best practices.

IN15. The CPC believes that the implementation of this guidance will contribute to the transparency and comparability of financial reporting in Brazil and will enhance the confidence of investors and other users of financial statements.

IN16. The CPC encourages entities to apply the guidance in a principled manner and to exercise professional judgment in the assessment of materiality.

IN17. The CPC is available to provide further clarification or assistance on the implementation of this guidance.

IN18. The CPC will continue to monitor the developments in international accounting standards and may update this guidance as necessary.

IN19. The CPC is committed to the high quality of financial reporting in Brazil and to the protection of investors and other users of financial statements.

IN20. The CPC thanks the market for its cooperation and support in the implementation of this guidance.

IN21. The CPC is confident that the implementation of this guidance will contribute to the improvement of the quality of financial reporting in Brazil and will enhance the usefulness of financial statements for users.

IN22. The CPC invites the market to continue to provide feedback and suggestions on the implementation of this guidance.

IN23. The CPC will consider the feedback received and may update this guidance accordingly.

IN24. The CPC is committed to the continuous improvement of the accounting standards in Brazil and to the alignment with international best practices.

IN25. The CPC believes that the implementation of this guidance will contribute to the transparency and comparability of financial reporting in Brazil and will enhance the confidence of investors and other users of financial statements.

IN26. The CPC encourages entities to apply the guidance in a principled manner and to exercise professional judgment in the assessment of materiality.

IN27. The CPC is available to provide further clarification or assistance on the implementation of this guidance.

IN28. The CPC will continue to monitor the developments in international accounting standards and may update this guidance as necessary.

IN29. The CPC is committed to the high quality of financial reporting in Brazil and to the protection of investors and other users of financial statements.

IN30. The CPC thanks the market for its cooperation and support in the implementation of this guidance.

SECURITIES COMMISSION
Rua Sete de Setembro, 111/2-5th and 23-34th Floors, Centro, Rio de Janeiro/RJ – CEP: 20050-901 – Brazil - Tel.: (21) 3554-8686 Rua Cincinato Braga, 340/2nd, 3rd and 4th Floors, Bela Vista, São Paulo/ SP – CEP: 01333-010 – Brazil - Tel.: (11) 2146-2000 exactly the Disclosure Initiative which, together with other necessary improvements focused on the informational content of financial statements, constituted a work front of the IASB called Better Communication in Financial Reporting. The Better Communication in Financial Reporting project is quite comprehensive and probably one of the largest projects currently underway by the entity. It highlights the importance and common themes of various IASB projects aimed at helping to make financial information more useful and improving the way financial information is communicated to users of financial statements.

The FASB, in March 2014, in a concrete action, issued for discussion the Proposed Statement of Financial Accounting Concepts titled Conceptual Framework for Financial Reporting, Chapter 8: Notes to Financial Statements (41 pages), as a conceptual framework for the issuance of notes. Additionally, a project named “Disclosure Improvements in Response to the SEC’s Release on Disclosure Update and Simplification” is currently underway by the FASB, aimed at reviewing and improving financial information disclosures in response to SEC requirements regarding the update and simplification of disclosure aspects.

IN5. The CPC then decided, in 2014, to conduct some surveys and concluded that guidelines on disclosure, especially in the notes, already existed in various Pronouncements, Interpretations, and Guidelines, mainly in Technical Pronouncement CPC 00 - Conceptual Framework for Financial Reporting (another nomenclature at the time) - and in Technical Pronouncement CPC 26 – Presentation of Financial Statements, as well as in the Law of Corporations (6.404/76) and in documents from various regulatory bodies.

IN6. It also concluded that there was the possibility of issuing some guidelines on this disclosure.

IN7. After analyzing this situation and considering that the IASB might take too long to conclude the ongoing projects related to this topic, this Committee – basing itself on existing regulations and ensuring that the requirements existing in each Accounting Pronouncement issued by this CPC were not left unmet – deliberated on the issuance of the original version of this Guideline, with the intent to clarify and reinforce that, in the financial statements and respective notes, relevant information (and only that) which actually assisted users should be disclosed.

IN8. And thus was born the original version of this OCPC 07 in 2014, approved on 09/26 of that year.

IN 9. From the issuance of the original version of this Guideline, there have been new manifestations from the IASB:

Still, in December 2014, the IASB approved the document Disclosure Initiative: Amendments to IAS 1, which altered the standard on the presentation of financial statements so as to make explicit, among other changes in the presentation standard, that notes to financial statements can be systematically grouped and ordered, giving, for example, prominence to the areas that the entity considers most relevant for understanding its performance and financial position, and not necessarily in the order of presentation of the financial statements.
In October 2018, the IASB approved the document Definition of Material: Amendments to IAS 1 and IAS 8, which altered standards IAS 1 (presentation) and IAS 8 (accounting policies and estimates), making it clear that the disclosure of immaterial information may prevent the primary user of financial statements from identifying what is and what is not material, thereby having the same effect as if material information were omitted or distorted.
In February 2021, the IASB approved the document Disclosure of Accounting Policies: Amendments to IAS 1 and IFRS Practice Statement 2, clarifying that only information corresponding to material accounting policies should be disclosed and that this information should focus on revealing how the entity applied accounting standards and not on repeating and/or summarizing them.
Other projects within the Better Communication in Financial Reporting front continue to be under development at the date of approval of the issuance of this version of OCPC 07, among which stand out:

o ED/2021/7: draft standard proposing that simplified disclosures be permitted for entities without an obligation to provide public accounts that are controlled by entities that adopt and disclose their financial statements in accordance with full IFRS.

o ED/2021/3: draft amendments to standards IFRS 13 and IAS 19 as a result of the application, in the form of pilot projects, of a new guidance guide for the IASB itself in the development of standards regarding disclosures required in notes. This guidance guide was developed seeking to address the problems of insufficiency of relevant information and excess of irrelevant information pointed out in the previously mentioned discussion forum, and its application is being tested in the aforementioned standards.

o However, as these are new projects, we alert preparers, auditors, and users of financial statements to the final wording when, and if, approved by the IASB.

IN10. It is very interesting to note that the main provisions contained in these documents issued by the IASB after the issuance of OCPC 07 were already contained in the original version of this Guideline. Thus, the basic reason for this revision relates to the updates of terms and drafting in OCPC 07, in observance of those used in other CPC documents that were altered, with no change in content regarding the previously introduced requirements.

CVM Resolution 189: Approval of Technical Orientation OCPC 07(R1) on Disclosure in General Purpose Financial Reporting

Lineage: In force

Timeline